IDEAS home Printed from https://ideas.repec.org/a/bjc/journl/v10y2023i10p23-36.html
   My bibliography  Save this article

Impact of Financial Innovation on the Competitiveness of Deposit Money Banks in Nigeria

Author

Listed:
  • AYODELE, Oluwafemi Godwin

    (Department of Finance, Redeemer’s University, Ede, Nigeria)

  • AFOLABI, Taofeek Sola

    (Department of Finance, Redeemer’s University, Ede, Nigeria)

Abstract

The world has changed dramatically, since the industrial revolution and innovation is now at the forefront of every industry. Scholars have identified innovation as a critical factor that aids economic expansion, accelerates financial development and facilitates investment diversification. However, despite the undeniable importance of financial innovation in fostering growth, questions remain on whether such innovation boosts competitiveness among banks in Nigeria. Therefore, this study investigated the impact of financial innovation on the competitiveness of Deposit Money Banks (DMBs) in Nigeria. Ninety-six bank officers were randomly selected from the twenty-four DMBs in Nigeria, to provide responses to a structured questionnaire, developed in line with the objectives of the study. A Structural Equation Model (SEM) was used to specify the relationship between the dimensions of financial innovation (mobile banking, internet banking, ATM banking & CBN digital currency) and banks’ competitiveness. The model assessment was done using the standard factor loading, composite reliability, construct and the discriminant validity tests. The Partial Least Squares (PLS) technique was further used to estimate the model parameters and test the research hypotheses, via the Smart-PLS 3 statistical software. The results revealed that both internet banking and CBN digital currency directly and significantly affect banks’ competitiveness. The study concludes that internet banking and CBN digital currency are key financial innovation tools influencing competitiveness among DMBs in Nigeria. Therefore, it is recommended that management and stakeholders in Nigerian DMBs should encourage frequent usage of their internet banking platforms by making it more customer-friendly and enhancing its safety features. Furthermore, the government should by way of policy encourage businesses and individuals to embrace the E-naira for carrying out financial transactions.

Suggested Citation

  • AYODELE, Oluwafemi Godwin & AFOLABI, Taofeek Sola, 2023. "Impact of Financial Innovation on the Competitiveness of Deposit Money Banks in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(10), pages 23-36, October.
    • Handle: RePEc:bjc:journl:v:10:y:2023:i:10:p:23-36
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijrsi/digital-library/volume-10-issue-10/23-36.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijrsi/articles/impact-of-financial-innovation-on-the-competitiveness-of-deposit-money-banks-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Josiah Aduda & Nancy Kingoo, 2012. "The Relationship between Electronic Banking and Financial Performance among Commercial Banks in Kenya," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 1(3), pages 1-6.
    2. Md. Qamruzzaman & Jianguo Wei, 2019. "Financial Innovation and Financial Inclusion Nexus in South Asian Countries: Evidence from Symmetric and Asymmetric Panel Investigation," IJFS, MDPI, vol. 7(4), pages 1-27, October.
    3. Alex Bara & Gift Mugano & Pierre Le Roux, 2016. "Financial innovation and economic growth in the SADC," African Journal of Science, Technology, Innovation and Development, Taylor & Francis Journals, vol. 8(5-6), pages 483-495, December.
    4. Peter W. Roberts & Raphael Amit, 2003. "The Dynamics of Innovative Activity and Competitive Advantage: The Case of Australian Retail Banking, 1981 to 1995," Organization Science, INFORMS, vol. 14(2), pages 107-122, April.
    5. Alex Bara & Gift Mugano & Pierre Le Roux, 2016. "Financial Innovation and Economic Growth in the SADC," Working Papers 627, Economic Research Southern Africa.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adegbola Olubukola Otekunrin & Tough Chinoda & Kudzanai Matowanyika, 2021. "The Nexus Between Economic Growth, Financial Development, Financial Inclusion and Financial Innovation in Africa," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(8), pages 672-681, August.
    2. Ganlin Pu & Md. Qamruzzaman & Ahmed Muneeb Mehta & Farah Naz Naqvi & Salma Karim, 2021. "Innovative Finance, Technological Adaptation and SMEs Sustainability: The Mediating Role of Government Support during COVID-19 Pandemic," Sustainability, MDPI, vol. 13(16), pages 1-27, August.
    3. Chang, Yuan-Chieh & Chen, Min-Nan, 2016. "Service regime and innovation clusters: An empirical study from service firms in Taiwan," Research Policy, Elsevier, vol. 45(9), pages 1845-1857.
    4. Chandralekha Ghosh & Rimita Hom Chaudhury, 2024. "Ranking of countries based on multi‐dimensional financial inclusion index: A global perspective," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1345-1377, April.
    5. Osman Gök & Sinem Peker, 2017. "Understanding the links among innovation performance, market performance and financial performance," Review of Managerial Science, Springer, vol. 11(3), pages 605-631, July.
    6. Walker, Richard M. & Chen, Jiyao & Aravind, Deepa, 2015. "Management innovation and firm performance: An integration of research findings," European Management Journal, Elsevier, vol. 33(5), pages 407-422.
    7. Myung Sub Lim & Choo Yeon Kim & Jae Wook Yoo, 2020. "How Strategic Conformity Interacts with Innovation: An Empirical Study on Korean Manufacturing Firms from the Perspective of Optimal Distinctiveness," JOItmC, MDPI, vol. 6(4), pages 1-18, October.
    8. Klapkiv Lyubov & Ulgen Faruk, 2022. "An Evolutionary Perspective on the Endogenous Instability of Capitalist Dynamics," Central European Economic Journal, Sciendo, vol. 9(56), pages 291-308, January.
    9. Marcos-Matas, Gustavo & Ruggeri, Arianna & Ghelfi, Rino, 2018. "The Role of Members' Commitment on Agri-Food Co-Operatives' Capitalization, Innovation and Performance," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(3), March.
    10. Rim Zouari‐Hadiji, 2023. "Financial innovation characteristics and banking performance: The mediating effect of risk management," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1214-1227, April.
    11. Mogotsinyana MAPHARING & Elang BASUHI, 2017. "Electronic Banking and Bank Performance: Botswana Context," International Journal of Emerging Trends in Social Sciences, Scientific Publishing Institute, vol. 1(1), pages 84-93.
    12. Md. Qamruzzaman & Wei Jianguo & Sharmin Jahan & Zhu Yingjun, 2021. "Financial innovation, human capital development, and economic growth of selected South Asian countries: An application of ARDL approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4032-4053, July.
    13. Jonathan O. Oniore & Uju V. Okoli, 2019. "Impact Of Electronic Banking On The Performance Of Money Deposit Banks In Nigeria," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 4(9), pages 83-90, September.
    14. Kostopoulos, Konstantinos & Papalexandris, Alexandros & Papachroni, Margarita & Ioannou, George, 2011. "Absorptive capacity, innovation, and financial performance," Journal of Business Research, Elsevier, vol. 64(12), pages 1335-1343.
    15. repec:ers:journl:v:volumexxi:y:2018:i:issue4:p:435-458 is not listed on IDEAS
    16. Adamantia Pateli & Naoum Mylonas & Aggeliki Spyrou, 2020. "Organizational Adoption of Social Media in the Hospitality Industry: An Integrated Approach Based on DIT and TOE Frameworks," Sustainability, MDPI, vol. 12(17), pages 1-20, September.
    17. Md. Qamruzzaman & Wei Jianguo, 2018. "Nexus between financial innovation and economic growth in South Asia: evidence from ARDL and nonlinear ARDL approaches," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-19, December.
    18. Gonçalves, Tiago & Gaio, Cristina & Silva, Mariana, 2018. "Target costing and innovation-exploratory configurations: A comparison of fsQCA, multivariate regression, and variable cluster analysis," Journal of Business Research, Elsevier, vol. 89(C), pages 378-384.
    19. Wei Li & Serhat Yüksel & Hasan Dinçer, 2022. "Understanding the financial innovation priorities for renewable energy investors via QFD-based picture fuzzy and rough numbers," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-30, December.
    20. Lui, Ariel K.H. & Lo, Chris K.Y. & Ngai, Eric W.T., 2019. "Does mandated RFID affect firm risk? The moderating role of top management team heterogeneity," International Journal of Production Economics, Elsevier, vol. 210(C), pages 84-96.
    21. Avom, Désiré & Bangaké, Chrysost & Ndoya, Hermann, 2023. "Do financial innovations improve financial inclusion? Evidence from mobile money adoption in Africa," Technological Forecasting and Social Change, Elsevier, vol. 190(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bjc:journl:v:10:y:2023:i:10:p:23-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Renu Malsaria (email available below). General contact details of provider: https://www.rsisinternational.org/journals/ijrsi/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.